Kenya has postponed the introduction of competitive bidding for investors seeking to establish renewable energy plants, delaying cheaper electricity to homes and businesses.
Energy PS Joseph Njoroge said the auction system would start once investors in power plants awarded licences under the current regime have injected a combined 1,342 megawatts or 56 per cent of Kenya’s power capacity into the grid.
“We have to clear the projects in the pipeline that had received licence under the current feed-in-tariff,” he said. “We received a task force report on the auctions and based on the findings, we think the first auction will be mid-next year.”
Experts reckon that Kenya will take years to inject the 1,342 megawatts, signalling that the auction system could take longer to implement.
The auction system was to apply to solar power plants of below 40 megawatts, wind plants (below 50 megawatts) and geothermal power plants of below 70 megawatts.
This system allowed the government to pick power projects and award them to bidders who offer to charge consumers the lowest tariffs.
Currently, investors identify viable power projects and then acquire licences from the Energy Regulatory Commission (ERC) to operate them at pre-determined rates without any requirement for tendering. The competitive bidding window was billed as a tool to slash electricity bills.
The feed-in-tariff for solar projects (between 10 and 40 megawatts) stands at Sh12.36 per unit ($0.12), and Sh11.33 per unit ($0.11) for wind projects of between 10 and 50 megawatts. The rate for geothermal power plants (35–70 megawatts) is Sh9 per unit ($0.088).
Kenya adopted the feed-in-tariff in 2008 as a policy instrument to attract investors in the renewable energy space as an alternative to expensive diesel-generated electricity.
Kenya Power #ticker:KPLC is obligated to buy electricity generated under feed-in-tariff — which covers smaller renewable power plants.
“This will help us plan well and match demand with supply. We want to reduce cases of having stranded power which forces consumers to pay for idle plants through capacity charges,” the ERC said in reference to the auction system.
If adopted, the power tendering system will see Kenya join the more than 60 countries that have embraced the auctions, including South Africa, Morocco, Brazil, Zambia and the United Arab Emirates (UAE).
Under the auction system, renewable energy developers will bid for contracts and those with the lowest bids will win government support.
Kenya’s renewable energy market has recently attracted dozens of local and multinational investors, who are constructing solar farms, wind parks and geothermal wells.
This is in response to the government’s call for private investors to develop clean energy plants as part of the country’s goal to add 5,000MW to the national grid by 2020.